Shot on location in Fishguard, Pembrokeshire, with Burton as First Voice, O’Toole as Captain Cat and Taylor as Rosie Probert, the film was based on the Swansea born poet’s original radio play.

The announcement comes as Wales and the UK prepares for the centenary celebration of Dylan Thomas' birth throughout 2014.

Events will be held in the USA and Australia as well as in Wales.

At a special 40th anniversary screening of the film in Cardiff’s Chapter Arts Centre last night, hosted by Bafta in Wales and supported by BBC Cymru Wales, Dr Sinclair announced the “substantial sum” the rights would raise will be administered by a new Wales-based body, the Milkwood Trust.

Initial Trust members will include former BBC Wales official and ex-private secretary to the Prince of Wales, Dr Manon Williams, Dr Sinclair and Dylan Thomas' granddaughter and president of the Dylan Thomas Society, Hannah Ellis Thomas.

Speaking to the Western Mail, Dr Sinclair said: “There are plans for computer applications of the work, in the form of apps and downloads and money will be raised from single performances of the film and from film rights and screenplay rights.

“The rights are very valuable, I went through three lawsuits with film studios who wanted to get their hands on them.

“I want the money to go to cultural and artistic projects and films made in Wales.

“The rights have a long way to run, they are valid until the end of the current century.”

Artefacts from the making of the film including letters written by Burton and Taylor, photographs, original scripts signed by the late Victor Spinetti (who played Mog Edwards) and other members of the cast are now part of a collection also “given to Wales” and will be kept at the National Library's Film Library in Aberystwyth.

Asked why he decided to gift the rights, London-based Dr Sinclair said: “If you have rights, you have duties...also, at 77 – I’m finite. But this film, which has become a classic, is infinite.”

Speaking about the making of the movie, Sinclair revealed Port Talbot-born Richard Burton was “desperate” to do Under Milk Wood.

He said: “Burton felt guilty over Dylan’s death because he did not lend him money for his last literary tour (on which he died).

“Dylan was always sponging off his friends but apparently Burton, who was a stage actor at the time, told him: ‘you are earning more money off the BBC than I am’”.

Sinclair added he had “made a fortune” doing Hollywood script work so secured the rights to Under Milk Wood.

He said he was shocked when his old friend Peter O’Toole rang him to say Burton and Taylor wanted to do the film.

He said: “I had not only one, but three of the biggest stars in the world.”

He said Taylor took an instant dislike to him and on one occasion had to be “carried” on to the set by Burton and O’Toole.

He added he caught Taylor doing her own make up and looking “like Cleopatra”.

He said: “I told her she was meant to be a Welsh whore called Rosie Probert but she insisted she always looked like Cleopatra.”

Sinclair, then 37, explained: “She hated me from day one because I didn’t fancy her and she knew it, but she expected men to fancy her.”

Sinclair added: “Despite that, along with O’Toole and Burton, Elizabeth Taylor agreed to do Under Milk Wood for £10,000 – which was virtually nothing because they were on a million a movie then. The whole film only cost £300,000.”

He added the people of Fishguard were magnificent in co-operating.

He said “As Richard Burton told me ‘All the Welsh are natural actors except those who are paid to do it’”.

Dewi Vaughan Owen, chairman of Bafta in Wales, said: “The story behind this iconic film will now forever be part of the cultural legacy of Wales.”

The film of Under Milk Wood also starred a young David Jason as Nogood Boyo, Susan Penhaligon as Mae Rose Cottage and Ruth Madoc as Mrs Dai Bread Two.